Tech Ideas is going to introduce a combination phone/tablet product. Design and testing will take 8...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Tech Ideas is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Tech Ideas expects to sell 30,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 26,000. And, sales in the final 6 months of the expected life cycle are expected to be 11,000. Tech Ideas is budgeting for this product as follows: Requirement 1. If Tech Ideas prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? Begin by preparing the life cycle income statement in order to determine how much operating income the company will make over the product's life cycle. Projected Life Cycle Income Statement Revenues Variable costs: Total variable costs Fixed costs: Total fixed costs Life cycle operating income ▾ 950000 Data table Months Months 0-8 Months 9-14 Months 15-26 Months 27-32 Type of Cost Design costs Production Marketing Distribution Production Marketing Distribution Production Marketing Distribution Ignore the time value of money. Print Total Fixed Cost for the Period $ $ EA $ $ 950,000 1,005,000 780,000 426,000 770,000 1,400,000 350,000 380,000 490,000 161,000 Done Variable cost per Unit $56 per unit $9 per unit $41 per unit $7 per unit $44 per unit $5 per unit - X Requirements 1. If Tech Ideas prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Tech Ideas is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $290 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Tech Ideas expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. Print - Done X Tech Ideas is going to introduce a combination phone/tablet product. Design and testing will take 8 months. Tech Ideas expects to sell 30,000 units during the first 6 months of sales. Sales over the next 12 months are expected to be less robust at 26,000. And, sales in the final 6 months of the expected life cycle are expected to be 11,000. Tech Ideas is budgeting for this product as follows: Requirement 1. If Tech Ideas prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? Begin by preparing the life cycle income statement in order to determine how much operating income the company will make over the product's life cycle. Projected Life Cycle Income Statement Revenues Variable costs: Total variable costs Fixed costs: Total fixed costs Life cycle operating income ▾ 950000 Data table Months Months 0-8 Months 9-14 Months 15-26 Months 27-32 Type of Cost Design costs Production Marketing Distribution Production Marketing Distribution Production Marketing Distribution Ignore the time value of money. Print Total Fixed Cost for the Period $ $ EA $ $ 950,000 1,005,000 780,000 426,000 770,000 1,400,000 350,000 380,000 490,000 161,000 Done Variable cost per Unit $56 per unit $9 per unit $41 per unit $7 per unit $44 per unit $5 per unit - X Requirements 1. If Tech Ideas prices the phone/tablets at $350 each, how much operating income will the company make over the product's life cycle? What is the operating income per unit? 2. Excluding the initial product design costs, what is the operating income in each of the three sales phases of the product's life cycle, assuming the price stays at $350? 3. How would you explain the change in budgeted operating income over the product's life cycle? What other factors does the company need to consider before developing the new combination phone/tablet product? 4. Tech Ideas is concerned about the number of units it expects to sell in the first sales phase. The company is considering pricing the phone/tablet at $290 for the first 6 months and then increasing the price to $350 thereafter. With this pricing strategy, Tech Ideas expects to sell 33,000 units instead of the originally forecast 30,000 units in the first sales phase, and the same number of units for the remaining life cycle. Assuming the same cost structure as given in the problem, which pricing strategy would you recommend? Explain. Print - Done X
Expert Answer:
Answer rating: 100% (QA)
To calculate the operating income over the products life cycle and the operating income per unit we need to consider the revenues and costs for each phase of the products life cycle Given that the pro... View the full answer
Related Book For
Horngrens Cost Accounting A Managerial Emphasis
ISBN: 9780135628478
17th Edition
Authors: Srikant M. Datar, Madhav V. Rajan
Posted Date:
Students also viewed these accounting questions
-
Hyten Corporation On June 5, 1998, a meeting was held at Hyten Corporation, between Bill Knapp, Director of Marketing/Sales, and John Rich, director of engineering. The purpose of the meeting was to...
-
Arnold Manufacturing, Inc., plans to develop a new industrial-powered vacuum cleaner for household use that runs exclusively on rechargeable batteries. The product will take 6 months to design and...
-
Jurgensen Manufacturing, Inc., plans to develop a new industrial- powered vacuum sweeper for household use that runs exclusively on rechargeable batteries. The product will take 6 months to design...
-
An interest payment of $650 in a 20 percent tax bracket would result in a tax savings of _____.
-
If the mass of the counterweight at A is 6500 kg, determine the force the gate exerts on the smooth stop at C. The gate is hinged at B and is 1-m wide. The density of water is ? w = 1 Mg/m 3 . 2 m m-...
-
A line passes through the point (1, 2) and has a slope of - 3. a. Sketch the line. b. Find an equation of the line.
-
Estimate the magnitude of the force of gravity exerted on (a) a packet of sugar, (b) a cup of water, (c) a packed carryon suitcase, \((d)\) an adult gorilla, and (e) a midsize car.
-
Jorg is building an office building for Wilmington Company for $ 20,000,000. The contract has the following characteristics: The office building is built to the customers specifications and the...
-
The Furniture Warehouse pays its sales representatives weekly on the following incremental commission schedule. Calculate the weekly gross pay for the following sales reps. Sales Volume Commission...
-
The Davis Lamp Company (DLC) is a wholesale company that purchases lamps from the manufacturer and resells them to retail stores. The company has three inventory items: desk lamps, table lamps, and...
-
A medical research organization has 16 doctors on their payroll that facilitate the research by examining the research participants on a scheduled basis. Currently, the doctors are not coping anymore...
-
You are given the following three projects to decide. Project A Project B Project C RM RM RM Year 0 -??? -??? -??? Year 1 11 7 7 Year 2 6 11 6 Year 3 7 6 11 IRR 4.908% 4.572% 4.126% Cost of project...
-
B. Change the cost of capital to 10.1%, the direct materials and direct labor savings to 18%, tax rate to 23%, and the cost of the new machine to $286,500, and terms of1/10, n/30. Calculate NPV for...
-
The market share price of Okinawa batteries is $25. The company's earnings per share were estimated at $1.80. The retained earnings were $13000. Calculate the price-to-earnings ratio.
-
Use this table of data for the succeeding questions: Data of an individual taxpayer for the current taxable period. Gross sales P3,200,000 Cost of sales 1,900,000 Sales discounts granted (for timely...
-
Frank Company manufactures wooden jewelry boxes. The following financial data pertains to costs incurred in one day of operations. Cost Amount Supplies Used (office only) $100 Lumber $2,600 Nails...
-
Sutherland Company listed the following data for 2019: Budgeted factory overhead Budgeted direct labor hours Budgeted machine hours Actual factory overhead Actual direct labor hours. Actual machine...
-
In the circuit shown in Figure 4, a battery supplies a constant voltage of 40 V, the inductance is 2 H, the resistance is 10, and l(0) = 0. (a) Find l(t). (b) Find the current after 0.1s.
-
The Walliston Group (WG) provides tax advice to multinational firms. WG charges clients for (a) Direct professional time (at an hourly rate) and (b) Support services (at 30% of the direct...
-
Channels is a manufacturer of flatware that is grade-rolled rather than stamped. The flatware is sold in upscale stores as a high-quality item. The company sells the goods that are within...
-
Jeong Natural Snacks is contemplating an expansion. The finance manager is looking at buying a second machine that would cost $62,000 and last for 10 years, with no disposal value at the end of that...
-
Many of the living organisms in Hawaii are found nowhere else on Earth. Hawaii has numerous unique species of plants, birds, insects, mammals, mushrooms, and other living things. Why?
-
Write a letter to Grandma telling her about drug resistance in living organisms. Explain to her why drug resistance is such a common phenomenonincluding why insects become more resistant to...
-
Laura says she doesnt believe that humans were at one time chimpanzees or gorillas. Jeff says he doesnt believe it either. Explain why biologists also dont believe that humans are descended from...
Study smarter with the SolutionInn App